For more background, please see The Basics of Quote-to-order Systems. CRM and ERP solutions require custom programming for deployment and maintenance, and provide limited interactive experience. Quote-to-order (Q2O) applications, on the other hand, may be able to bridge the gap for complex manufacturers by providing proactive solutions to their complex sales concerns.

Nothing but an Underlying E-business Platform

Communication is vital in any supplier-buyer relationship, and even more so in supplier-indirect channel relationships when offering and selling complex products. Information exchanged between supplier and buyer must be bidirectional and, above all, up-to-date if the relationship is to realize its full potential for both parties. It is a well-known fact that traditional phone, fax, and paper-based communications systems are labor-intensive, inefficient, and prone to error. Companies have historically dedicated significant resources and time to the manual entry (re-keying) of information from faxed or phoned-in purchase orders, as well as to the manual processing of paper checks, invoices, and shipping notices. While spreadsheets and e-mail are also used to manage their business relationships, even these electronic systems can be inefficient and difficult to integrate.

The large volume of paper generated by these systems, and the mass of information to be sorted and processed, frequently produce hidden costs due to errors and delays in information delivery, as timely changes can be difficult to implement in manual processes. The cost related to such changes can also be significant. For example, a paper-based catalog (if even applicable in selling complex products) cannot be quickly or inexpensively updated to inform customers of changes in product offerings, availability, or pricing.

In addition, a manufacturer and members of its distribution network often have limited capability to track orders, inventory, warranties, and other information (or to compile useful databases) using paper-based or semi-automated processes. These forms of communication do not permit manufacturers and their business partners to exchange information on a real-time basis, and thereby prevent easy access to key information needed to transact business. Manufacturers may also have to deal with differences in languages and time zones—additional barriers that traditional methods cannot easily overcome. Even so, increasing market and supply chain complexity motivates companies to improve operations and communications with their trading communities.

Furthermore, traditional ERP systems tend not to provide the visibility and control required to efficiently manage and synchronize extended business processes. This results in excess operating costs and poor customer service. The ability to view complete and accurate orders, to integrate data, and to manage inventory and activities for effective fulfillment execution is necessary to effectively respond to challenging customer requirements and to achieve competitive advantage. Hence, modern Q2O suites have to provide access to design, planning, and material data for customers and suppliers.

Access to Q2O information enables users to proactively understand various aspects of the project, as well as reduce planning time, document activities, and promote communication throughout the engagement cycle. Multiple deployment modes (such as on-premise, hosted, mixed-mode, etc.; see Software as a Service's Functional Catch-up) and a highly scalable architecture are required to support millions of simultaneous users (even if, in case of scalability needs, more servers are installed to share the load). Q2O modules have to integrate (via open standards) with other Web-based applications and legacy systems through Web services. The ability to dynamically update product information without stopping the selling process is often needed.

Some potential benefits of information access include

increased communication, with around-the-clock information access for customers and suppliers;

reduced customer service calls by providing up-to-date status of orders and schedules;

These points are especially important when selling complex products because the knowledge that is so often inaccessible elsewhere in the organization needs to be made available to field salespeople and the sales channel. Sales channels need solutions to help them close sales rather than to just manage their contact lists.

To that end, Q2O applications have to be designed to enable enterprises to easily develop and rapidly deploy an Internet sales channel that interactively assists the enterprises' customers, partners, and employees through the selection, configuration, pricing, quoting, and fulfillment processes. Such a platform has to be able to provide up-to-date product, price, and customer information, as well as have the ability to develop a more complete and accurate product offering to meet a specific customer's requirements on the spot.

Furthermore, the solution has to have “point-and-click” synchronization with central enterprise systems to rapidly assimilate new or upgraded products, revised pricing, and other changes. The Q2O product also has to enable mobile users to access the solution with the same user interface (UI), performance, and reliability as a connected system. The Q2O solution must allow companies to use the Internet platform to deploy a selling application to many points of contact, including personal computers (PCs), in-store kiosks, and mobile devices (such as personal digital assistants [PDAs] and cellular phones), while offering customers, partners, and employees an interface customized to meet their specific needs. Only by fulfilling these promises will customers and sales forces alike see these solutions as delivering true benefits (and not extra burdens).

In order to expand Q2O into the opportunity-to-cash realm, some more advanced Q2O systems provide the functionality, business rules, and integration required to support multiple distributed order management (DOM) scenarios. DOM scenarios can come in many forms, including a single face to the customer across business units and internal systems, central order placement with distributed fulfillment, shared commerce and partner storefronts, private marketplaces, and more.

It must be apparent by now that selling complex products and services has always presented special challenges. These challenges have been magnified by recent demands from the global marketplace, distribution channels, technology, and customer expectations. To retain a position of leadership, organizations need to understand the specific threats to and opportunities for their products and markets, and they must develop approaches that will allow them to become more efficient, more reactive (if not even proactive), and more effective.

Certain specialized software suites (and components) are now available that address the very specific issues of selling complex products and services, and these solutions enable these new approaches to be implemented. These software components help compress the Q2O lead times—to within an hour—by facilitating such processes as needs assessment, specification and pricing, design validation, product configuration, automated drawing and document generation, and workflow management.

To that end, Q2O solutions promote operational superiority in several ways, starting with guided selling. Guided selling matches the right moderately complex product and the right set of services to customers' needs at the right time in the sales process. As the increasing complexity of products and service offerings, combined with increased focus on the customer, has forced companies to seek ways to improve how they sell their products, guided selling has become essential for any organization that wants to sell customers the exact product that meets their unique requirements. Companies are able to augment their catalogs with a guided selling environment that includes selling scenarios geared to any customers' experience levels, so that customers can more easily find the products and services that best meet their needs.

Guided selling solutions typically provide the tools that allow manufacturers of complex products to capture product, service, and business knowledge—potentially increasing overall productivity, sales effectiveness, and profitability. This makes it easier and less expensive for enterprises to conduct business, as well as for customers, in turn, to do business with the company. Moreover, guided selling solutions accelerate salespeople's learning curves (especially new hires and new partners), allowing companies to keep engineering and product development experts dedicated to their assigned tasks rather than being constantly disrupted by the sales cycle.

On the other hand, guided buying and selling become integral components for any organization that wants to sell simple-to-complex products and services over the Internet. As discussed earlier, historically, the Internet has not been a viable channel for products and services (please see part one of this series, The Basics of Quote-to-order Systems) that require the skills of a knowledgeable salesperson to guide the buyer. Namely, to be successful, Web-based sales applications have to guide customers to the exact product or service that meets their distinctive requirements, regardless of the complexity involved.

Thus, by deploying the knowledge of the most experienced salespeople, the benefits and opportunities of guided selling include

improved win rates (by providing real-time feedback at the point of sale);

delivery of a consistent customer experience throughout the entire sales channel;

increased sales productivity, while reducing training and support time.

Product Configuration—the Heart of the Quote-to-order Process

Bundled with guided selling is product configuration, which translates features, dependencies, and options into a product variant that can be built and delivered. Configurators, in fact, provide a validated guided selling process by enabling customers to define product and application requirements by description. Customers can then work at their own pace and make selections in any order (as the configurator should not require defined start and endpoints). If an error is made during the selection process, it is correctable at any time. Similarly, if additional options or accessories are required as revisions, they are also modifiable at any time. Furthermore, contextual “help” bullets and suggestions are often provided to assist customers in making appropriate selections that satisfy their requirements.

Product configuration is a key technology that enables the implementation of mass customization. As discussed earlier, mass customization means that customers can select, order, and receive a specially configured product, often from among hundreds of product options and with assurance of no significant increase in price, to meet their specific needs. Providing customers with exactly what they want is not exactly a new concept, but the idea of giving the customer an ever-expanding range of choices as early as possible has become the center of various industries' customer-oriented activities, given that getting an accurate, customized product to the customer more quickly fosters competitiveness.

To that end, configurators also strengthen the business of customer care by streamlining and accelerating the entire sales process, as well as by deploying uniform and accurate information at the point of sale. Since configurators facilitate identification of customers' wants, they are becoming central in many traditional selling environments and in e-commerce applications. Configurators can also be deployed over multiple channels, such as the Internet, local area networks (LANs), desktop computers, and laptops for salespeople on the road.

To implement mass customization successfully, manufacturers need to overcome several major challenges. For one, the time taken to configure products manually is often prohibitive because of the huge number of combinations that need to be considered before arriving at a valid configuration. In addition, extensive training and expertise are needed in creating configurations of complex products, while there is always the possibility of making errors, since the final product may involve thousands of configurable parts. Errors, obviously, can create major schedule slips and lead to costly iterations in downstream processes. A product configurator that enables manufacturers to efficiently deliver customized products by automating product configuration processes is one of the key technologies in implementing mass customization.

APICS Dictionary (a reference guide for the operations management field) defines configurator as a software system that creates, uses, and maintains product models that allow complete definition of all possible product options and variations with a minimum of data entries. A product configurator is a system, generally rule-based, used in design-to-order, engineer-to-order (ETO), or make-to-order (MTO) environments, where numerous product variations exist. Product configurators perform intelligent modeling of the part or product attributes, and often create solid models, drawings, bills of material (BOMs), and cost estimates that can be integrated into computer-aided design/computer-aided manufacturing (CAD/CAM) and ERP systems, as well as sales order entry systems.

Simply, the product configurator is just a rules (sometimes called procedures) and constraints software tool that captures a customer's requirements as input, and then automatically generates a configured product exactly matching a customer's specific needs, based on predefined design constraints. Given customer requirements and built-in product descriptions, the configurator will first search all possible product options and combinations within the restrictions imposed by design constraints, and then create a valid product configuration that matches the customer's specifications.

The solution “guides” the user through the process (where the user can specify requirements and make selections in any order) and “streamlines” order entry process (by asking the customer to select from a set of predefined options associated with a generic product line). At the end of the process, it populates the attributes of the newly configured end item (called the variant product), tests for any conflicts (based on a set of well-defined restrictions on how the component types can be combined), and generates the variant product with the appropriate BOM, routing, and pricing, based on preconceived rules and calculations.

Any sound CRM strategy revolves around clear communication with the customer—knowing what the customer wants, when he or she wants it, and what price is acceptable to both parties. Configurators have long been available for “internal use” by highly trained personnel, but the newest generation of online configurators is “customer-focused” and developed first and foremost to meet the needs of customers when purchasing products. Thus, configurators are crucial to the sell side of business-to-business (B2B) and business-to-consumer (B2C) e-business applications because they can be the foundation to self-service applications on a web site and available for use by potential customers. At the conclusion of the selection process, the item can be placed in a shopping cart, while the configurator generates all pertinent product information including specifications, prices, quotes, proposals, and order fulfillment lead times.

As product configurators have evolved to include even more sales, marketing, and financial functions divergent to the product (such as pricing, cost analysis, sales commissions, available-to-promise [ATP], order status, etc.), the term “sales configurator” has increasingly been used to reflect the tool's expanded role. It may more accurately describe the configurator's extended role as a tool that assists salespeople with not only building viable products, but performing such related tasks as proposal and quote generation. Depending on the complexity of the product and customer needs, configurators (at the wish of the supplier) might also generate installation and assembly instructions, user manuals, and literature. Not only do configurators generate product information (such as part numbers and specifications) as an intuitive interface for customers and sales channel participants, they may also generate specific multiple, user-defined outputs, including orders, BOMs, routings, work breakdown structures (WBSs), contracts, discounts, and “special offer” pricing in multiple currencies. Such transactional data and documentation often have to be integrated with other business systems, including ERP, CRM, and supply chain management (SCM).

Online configurators provide many potential benefits to both suppliers and their customers. Primary customer benefits include not needing to be an expert on the supplier's products; having instant, around-the-clock information; and placing orders easily (without any paperwork).

Reduced sales cycles via faster and error proof product specification and quoting, shorter sales order processing, and the ability to offer more aggressive manufacturing lead times.

Increased sales via improved cross-selling and up-selling opportunities. For example, a prospective PC buyer may be prompted to consider additional features, such as increased memory, or complementary products, such as a printer, based on specific selections made. Increased sales also stem from flexible, dynamic pricing and lower customer transaction costs.

Reduced costs of goods sold; of administration (by eliminating ordering errors); of selling (by freeing sales and marketing personnel to focus on more profitable activities, such as building relationships, prospecting for new accounts, and executing promotional programs); of engineering staff (by eliminating many review steps); and of IT departments (in the case of very functional off-the-shelf packages, IT personnel roles and responsibilities can be limited to the initial installation of the configurator application and the integration of the application with other business system applications).

Reduced products and parts. By discerning which items are being configured together, organizations can decrease inventory and eliminate slow-moving and nonstandard items or parts from inventory, thus stocking only high-demand items. Without a configurator, manufacturers would have to create large numbers of customized products straight from stock in anticipation of potential demand, which has become prohibitive and impractical. With a configurator, enterprises can have many components and raw materials identified, preassembled, and ready for final assembly.

Increased efficiency of sales and operations planning (S&OP). Provided the configurator is integrated with other CRM and ERP applications, an organization can discern the upcoming, exact configurations in real time, and create more accurate forecasts and final assembly schedules (FASs) from this data. For more information, please see Sales and Operations Planning.

This is part three of the series The Basics of Quote-to-order Systems. In part four, accurate quoting and pricing will be discussed along with Q2O options available to the different manufacturing industries.